Home prices have doubled over the last decade, propelled by low rates and easy mortgage terms. But as the U.S. experience proved, soaring property values can come with an ugly downside. The Globe and Mail examines the foundation of Canada's historic real estate boom in a series.

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For just the second time in the past century, the country’s housing market is pushing the limits of affordability, according to key statistical measures, shutting many potential buyers out of the market, and making it harder for those who have already taken the plunge to pay off their mortgages.

In the past decade-and-a-half, house prices have accelerated at a rate that has outpaced increases in disposable income – though interest rates at historically low levels and a greater comfort level with debt helped mask the risks. Even the recent cooling in the housing market has so far been marked by a drop in the number of sales, with little downward movement in prices.

“There is no question that in Canada, we are in a real affordability crisis right now,” said John Andrew, a professor in Queen’s University’s school of urban and regional planning.

Since 2000, the price of houses across Canada has risen 127 per cent; nearly 50 per cent since 2006.

It’s no surprise that housing is expensive, but there’s no relief in sight. If anything, housing is likely to become even less affordable later this decade as interest rates return to more normal levels – unless there is a precipitous decline in real estate prices.

A sharp spike in rates – like those seen in 1981 and 1990 – is unlikely. But even a small increase in rates will cause major pain for current homeowners saddled with record mortgage debt, larding on hundreds of dollars to monthly payments.

“There is going to be a very rude shock to the system once mortgage rates move up,” said Prof. Andrew. “Rates have been low for enough years that people have forgotten how unaffordable houses really are.”

A perfect storm

The current run-up in house prices began in about 1997 and has continued almost unabated despite very small gains in income over the same period. Only once before in the last 100 years has there been a similar long-term shift, and that was back during the postwar years as returning veterans and a widespread housing shortage pushed prices up sharply in the late 1940s and early 1950s.

Before that, prices had been very stable in the 1920s and 1930s. And from the 1950s to the late 1990s there was another long period of relative stability, punctuated only by a couple of brief mini-booms in the 1970s and 1980s that were followed by quick pull-backs in prices.

This time, a perfect storm of low interest rates, coupled with a relatively strong economy and Canadians’ ever-growing willingness to pile on debt, prompted a nearly unprecedented run-up in prices. High immigration numbers and limited land for expansion in the country’s largest cities have exacerbated the problem.

High-school math teacher Nadine K. Mohammed, 32, always thought she’d own a house by now. “I thought I’d go to university, get a really good job, save some money, and that would be the ticket to being able to afford a home. I was so excited,” she said.

Instead, the Toronto resident, who has been teaching for eight years, is renting the main floor of a bungalow in the west-end neighbourhood of Etobicoke with her husband. They save everything they can to put toward a down payment and hope to purchase a home in the next two to three years. “But if prices continue to go up, I don’t know if that’s going to happen,” Ms. Mohammed said. “It’s kind of a scary thought.”

The couple also worries that when they’re ready to buy a home in the city, it will be “really tiny.”

While some of her friends managed to purchase their first homes when they were in their twenties, they were able to live rent-free with their parents to save money. “Then voila, they had down payments,” she said. “Once you have to pay rent, saving takes a lot longer.”